A support system is one of the important things that you should set up if you want your debt consolidation strategy to succeed. It does not matter what strategy you will choose to achieve debt freedom. You have to set up a support system to ensure that you will reach all your financial goals.

When you are in debt, that is an indication that you did something wrong with your finances. Having debt does not just mean you were reckless with how you managed your money. If you failed to save up for an emergency fund, that can also force you into debt. In one way or another, your debt is a result of a bad decision that you made.

This is the reason why having a support system is important. Obviously, your judgment is flawed if you landed yourself in a debt mess. While there is always room for improvement, having someone there to stand with you as you free yourself from the clutches of debt is always a welcome relief. They can really make a huge difference as you try to complete your debt consolidation strategy.

We all need debt consolidation help but that does not mean it should be from a professional. It can be the people around. It does not even have to be a group. You can choose just one person to serve as your support system. This person does not even have to know that they are playing that role in your life. As long as you know that you can air out your frustrations on them with hearing any complaint, you can rely on them to get you through very challenging financial times.

Why your debt consolidation strategy needs a support system

Basically, you need a support system because getting out of debt can be quite frustrating – especially if you are using a debt consolidation strategy. According to various studies, having a network of social support brings a lot of positive benefits. This includes improving the ability to cope with stress, helping with good mental health and self-esteem, and even encouraging people to stick to a plan that will improve their situation.

As you can see, your support system can prove to be an asset in making your debt consolidation strategy a success. There are two important reasons why this can be very useful specifically during debt consolidation.

There is not much debt reduction

First of all, you will not get a lot of debt reduction. You will still end up paying for everything that you owe. If there is a reduction in payments, it will only be caused by a lower interest rate. Or maybe if you try to negotiate the fees and charges. But all of these are not guaranteed and will be under the discretion of the creditor or lender. The bottom line is, the reduction will not be on your actual debt. This can make some people feel overwhelmed and frustrated about the whole debt relief process.

It might take longer to complete

Another quality of debt consolidation is that it will take you a lot longer to completely pay it off. Since there is no debt reduction, paying it all off will take some time. If your debt consolidation strategy is set up in such a way that will give you lower monthly payments, that means it will take even longer to be free from debt.

Both of these reasons can lead you to feel very frustrated, overwhelmed, and stressed out. It will not be long before you feel discouraged about your debt situation. When that happens, it will be harder to complete your debt consolidation strategy. One setback and you might find yourself giving up or borrowing more money. This is why you need someone to help pull you back and calm your frustrations.

Where to find your support system during debt consolidation

The thing is, choosing who you will assign as your support system during debt relief is not that easy. Sometimes, you are surrounded by people but when you think about it, you do not have anyone to really talk to about debt. Admittedly, it can be an embarrassing subject. In fact, even couples do not talk about money. In one research, it is revealed that 4 out of 10 Americans have no idea how much their spouse is earning. If you cannot even ask your spouse how much they are earning, how can you talk to them about your debt situation?

Obviously, you need to get over with your aversion to talking about money. If you are making bad financial decisions, it is best to have someone else input their opinion about it. Of all the people around you, here are some of your options for your support system. Anyone of these people can help you complete your debt consolidation strategy.

Your special someone

Your partner or your spouse should be your first pick when it comes to your overall support system. At the very least, you owe it to them, to be honest about your debt situation. If they really love you, they should be understanding of your predicament. They should be more than willing to assist you as you try to improve your financial position. After all, your financial success will also be their own.

Your family

In case you do not have a special someone yet, you can turn to your family for help. The truth is, there are financial situations that can be beneficial to you and your family. There is nothing like a problem that you can work on together to bring you closer. Then again, you do not have to announce to the whole family that you have a debt problem. You can choose one member who you are closest to. It can be your parents or your siblings. You can even choose your favorite cousin. It should be someone who understands you and you respect enough to listen to them when they are trying to get you to do the right thing.

Your friends

Your friends can also be a good source of a support system as you try to complete your debt consolidation strategy. Maybe you have friends who are going through the same financial situation as you. It might make things easier if you and a close friend go through your respective debt relief programs at the same time. You can share experiences and stay together as you try to save as much money as you can to increase your debt payments.

A debt expert

Another option for you is a professional. There are credit counselors who can help you with your debt consolidation strategy. Some of them work for non-profit companies. That means their service is for free. You are allowed to make donations but it is not compulsory. These debt experts can give you sound advice that will help you complete your journey towards debt freedom. And since they are practically strangers, you do not have to feel embarrassed about your debt situation.

From strangers

Finally, you can also turn to strangers online. There are forums that you can visit to air out your financial concerns. Sometimes, you will find someone who went through the same experience as you. Just make sure that when you talk to them, you will not reveal any personal information to them.

There are also blogs that specifically tell successful debt relief stories. Read these stories so you can find your motivation. If they can do it, there is a high chance that you can do it as well.

Debt consolidation seems like a very difficult task if you are living from paycheck to paycheck. This is a type of financial situation wherein your income is just enough to cover your monthly expenses. You do not have any extra money left over after all your financial obligations are paid off. You find yourself running out of money a few days before your paycheck. This can be a very stressful financial position because you do not have the extra money to cover any unexpected expense.

The combination of debt and living from paycheck to paycheck seems like a very difficult situation to be in. How can you afford to pay off your debts if you are hardly getting by? Well, debt consolidation can surely make things better when it comes to your debt payments. It will allow you to focus on other things because your debt repayment plan is more simple. Among the things that you should look into is how you can improve your financial situation so you are no longer living from paycheck to paycheck.

Tips to succeed in debt consolidation despite limited finances

What is great about using debt consolidation is that it requires little effort to monitor and manage. This will give you the opportunity to work on a couple of things that will hopefully have a positive effect on your finances. Obviously, if your income is barely enough to cover your expenses, there is something wrong with how you manage your finances. Do not make the mistake of thinking that all you need is a higher income to get by. It will help, that is true. However, it is not a solution.

To ensure that you are improving your financial situation while using debt consolidation, here are the things you need to look into so you can succeed are your debt relief efforts.

Budget

If you really want to get better at handling your finances, you need to start by looking at your current budget plan. You need to check both your income and expenses to find out why you are in this financial situation. Are you spending too much? Or maybe you are earning too little? Maybe your budget plan is no longer aligned with your current financial position. You need to change that and give your plan an update. List all your expenses and compare it with your income. If you find that your expenses exceed your income, you know that something has to change.

Lower spending

As you look into your budget plan, it is important for you to focus your attention on your spending. Your limited resources should prompt you to be careful with how you spend it. You need to list all your expenses and rank them according to priority. This will make it easier for you to identify the expenses that you can cut back on.

The goal here is not just to lower your spending but also to be smarter with your choices. It is the fastest way you can get extra money so you no longer have to live from paycheck to paycheck. You should also know that smart spending is one of the ways that you can guarantee success when it comes to debt consolidation.

Increase your income

If you have exhausted all your efforts to lower your spending and you are still struggling with debt consolidation, you might want to consider increasing your income. Lowering your expenses can only do so much. This can limit the improvement that your finances need to go through in order to stop living from paycheck to paycheck. Earning more will make it easier for you to build your personal net worth while you are paying off your debts. It will also help you achieve financial security a lot faster.

Stop using debt

Apparently, it is not just hard for us to keep on borrowing money. When we are in a tough and unexpected situation it can also drive us to borrow more money. A published report revealed that 4 out of 10 adults will borrow money in order to get out of an emergency expense. This is a bad idea when you are in the midst of a debt consolidation program. You have to try and avoid being put in this situation. You have to exert self-control so you will not use credit cards unnecessarily. If you cannot afford to pay for something in cash, do not spend.

It is also a good idea to have an emergency fund. That way, you do not have to resort to debt for every unexpected event that will happen in your life. You have this reserve fund to tap into if you need to pay for something important that is not in your budget.

Make sure you have the right debt consolidation strategy

Apart from trying to improve your financial situation, you should also make sure that you are using the right debt consolidation strategy. Having the wrong debt solution will still make the debt relief journey difficult and stressful. It will be hard for you to take care of the various aspects of your financial life so you can stop living from paycheck to paycheck.

There are two things that you need to ask yourself while choosing among the different debt consolidation options.

How much can you afford

First of all, you need to be honest about how much you can afford. Consolidating debts will not reduce the principal amount that you owe. You can save by lowering the interest rates but nothing will be done for the original debt that you borrowed. You have to pay it all back. If you think that downsizing your lifestyle will still make it impossible to afford to pay off your debts, then you might need a debt reduction.

What is your current credit score

You also have to consider your current credit score situation. If it is high, you can opt to borrow a loan or open a new credit card account to consolidate debt. A good credit score will help you get a low-interest rate which in turn will help you save money. However, if you have a bad score, you might want to opt for debt management instead. Both these options will consolidate debt but the effect will depend on what your credit score is.

Admittedly, completely paying off your debt can be very challenging. This is why you need to have a debt solution that will make things easier to accomplish. It will help you have a more structured payment that is customized according to your financial situation. That means it will allow you to pay off your debts without making it feel like a burden.

One of the best strategies to improve your repayment plan is to consolidate multiple debts. And you can do that by refinancing one of your current debts.

Use these 3 debts to consolidate multiple debts by refinancing

Refinancing involves getting a new loan for an existing one. The goal is usually to take advantage of improvements to the repayment plan. This can include a shorter or longer repayment period. This will depend on how much you can afford to pay each month. The improvement can also be on the interest rate. If you can get a lower interest rate, that would be a huge improvement.

Now that you have an idea on what refinancing is all about, let us get to know how you can do it. There are three types of debt that you can refinance to help you consolidate the different debts that you owe.

Mortgage refinancing

This is probably the most popular way to refinance. At least, this is true for homeowners. The great thing about a mortgage is that every payment you make adds to your home’s equity. Thanks to this growing equity, you can expect your personal net worth to increase as well. The best part about this is you can use it to help make debt repayment easier.

When you refinance your mortgage, you need to find out how much equity you have. The thing about using a mortgage is you need to pay closing costs to complete the application. But if the decrease in the interest rates can make up for these costs, then it could still work out in your favor. As you refinance, you can also use the equity to consolidate multiple debts. If you include high-interest rate credit card debts, it might even be more beneficial.

Auto loan refinancing

Another refinancing option involves your car loan. Just like your mortgage, this can help with high-interest debts because it is a secured loan. You are putting the vehicle as collateral. However, unlike a home loan, the collateral does not appreciate in value. Instead, cars depreciate. This is why it is best for short-term repayment plans. You also cannot expect to refinance a huge debt amount because, as mentioned, cars depreciate in value.

The same rule applies when you take out an auto refinancing. You have to pay it off as quickly as possible so you can benefit from the savings.

Balance transfer cards

Technically, this is credit card refinancing. You get a new credit card that you will use to transfer all your debts. A balance transfer card is usually offered with a 0% interest rate or at least a very low one. When you transfer your other credit card debts, you need to pay a fee that is usually 3% of the amount you transferred. But with all the savings you get from the 0% interest rate, it should be worth it.

This interest rate is only temporary so you should make sure that you can pay all of your debts within the promo period. Otherwise, the card will have a higher interest rate and it can cost you more. If you really want to consolidate credit card debt through a balance transfer, make sure that you have a short repayment plan. That way, you do not have to worry about the high-interest rate once the 0% interest rate expires.

Apart from credit cards, it is also possible to consolidate personal loans. But make sure you make the necessary calculations. You want to ensure that you are saving money and not paying more if you just left the debts in their original repayment plans.

When is it a good idea to refinance for consolidation

Although some people can swear that refinancing to consolidate multiple debts is a good idea, it is not always the case. There are specific situations when it can be a bad idea while there are instances when it is a good one.

Here are the specific situations when consolidating debts through refinancing is a good idea.

When you have a better credit score

Your credit score has a huge influence on your interest rate. If you have improved your credit reputation since you borrowed your original debts, it could help you get a lower interest rate. This will really work well in your favor. You get more options and probably negotiate better terms for the new loan that you will borrow.

When you need better repayment terms

Finally, it makes sense to consolidate multiple debts through refinancing if you can improve your repayment terms. By improvement, this means it suits your financial situation better. A lot of things can happen from the moment you started with your debts until this very moment. It is possible that events in your life made it harder to keep up with payments. If that is the case, then you need a new repayment plan that will allow you to pay a smaller amount. Or maybe there is now a need to pay off your debts faster. That means you need to be able to make bigger payments so you can completely pay off your debts within a shorter time. These can be arranged when you refinance your debts.